VMJ Construction, LLC (“VMJ”) and its owner, Colorado resident Michael T. Vigil, as well as Maryland-based Vigil Contracting, Inc. (“Vigil Contracting”) and its Operations Manager, John J. Vigil, agreed to pay the United States $3.6 million to resolve allegations that they defrauded the Small Business Administration (“SBA”) 8(a) Business Development Program.

The SBA’s 8(a) Business Development Program (the “8(a) Program”) for economically and socially disadvantaged small businesses serves dual roles. First, the program helps socially and economically disadvantaged small business owners gain access to valuable federal contracts, thereby promoting economic and social mobility. Second, the program saves taxpayers money by spurring a competitive marketplace. By promoting the development of small businesses, the 8(a) Program helps prevent the formation of monopolies that would stifle innovation and restrict consumers’ ability to negotiate lower prices. It is important that the 8(a) Program is reserved only for companies that actually meet the program’s criteria because misuse of the program deprives legitimate 8(a) Program participants of valuable economic opportunities and undermines the integrity of the program.

There are several rules that businesses in the 8(a) Program must abide by. The socially and economically disadvantaged owner of the business must manage the day-to-day operations of the company and have responsibility for the long-term decision-making for the company. 8(a) Program applicants must also truthfully disclose any affiliation with other businesses so that SBA may accurately assess whether the applicant meets the definition of a small business, and whether the applicant shows potential for success and the ability to perform the requisite percentage of the contracts secured through the Program. Businesses also cannot remain in the 8(a) Program indefinitely; after nine years, they graduate from the program and are no longer eligible to bid on 8(a) contracts.

VMJ was accepted into the 8(a) Program in 2011. Michael T. Vigil, who is Hispanic, was the 91% owner of VMJ, and was the socially and economically disadvantaged individual upon which VMJ based its application to the 8(a) program. John J. Vigil was a 9% owner of VMJ. John J. Vigil was also the Operations Manager of Vigil Contracting. Vigil Contracting is a 2011 graduate of the 8(a) Program. Since 2011, Vigil Contracting has not been eligible to bid for contracts reserved for 8(a) Program participants.

The United States contends that VMJ made false statements to the SBA regarding its eligibility to participate in the 8(a) Program. Specifically, VMJ relied almost exclusively upon Vigil Contracting to bid on and complete the work awarded to VMJ under the 8(a) Program. VMJ used Vigil Contracting’s bonding, office space, employees, contractors, software, computers, and vehicles. Vigil Contracting employees and contractors, including John J. Vigil, made the high-level business decisions of VMJ and managed the day-to-day operations of VMJ. Michael T. Vigil did not control VMJ, did not set the long-term policy, nor manage the day-to-day management of the business. VMJ knowingly misrepresented these facts to SBA, in both VMJ’s initial application to participate in the 8(a) Program and in an annual update to SBA. As a result of the deception, the United States Army, the United States Navy, and the United States Department of Agriculture awarded VMJ several federal government contracts set aside for 8(a) Program participants.

“The United States uses these set-aside contracts for a clear reason: to help small businesses owned by economically and socially disadvantaged individuals. This program continues the promise of the American Dream by helping new small businesses get on their feet, and with more businesses on their feet, our markets are healthier and more competitive.” said United States Attorney, Jason Dunn. “When companies lie about their eligibility to get these contracts, they prevent other deserving small businesses from getting the assistance that Congress intended.”

“The false statements in this case were intended to deceive the government into believing that VMJ Construction was operated by a disadvantaged small business owner whom was eligible to participate in SBA’s 8(a) Program,” said SBA Office of Inspector General Western Region Acting Special Agent-in-Charge Weston King. “The defendants in this scheme sought personal gain at the expense of disadvantaged small businesses. I want to thank the U.S. Attorney’s Office and our law enforcement partners for their dedication to enforcing compliance in SBA’s contracting programs.” SBA’s General Counsel Christopher Pilkerton adds, “The outcome in this case is the product of enhanced efforts by federal agencies such as the Small Business Administration working with the U.S. Attorney’s Office and other Federal law enforcement agencies, to detect procurement fraud and prosecute those individuals and companies that engage in such activities.”

“The Defense Criminal Investigative Service will investigate all allegations of abuse related to Government set aside programs designed to encourage and support veteran, woman and minority owned small businesses. DCIS will pursue all appropriate criminal, civil and administrative actions against individuals who abuse these programs for illicit financial gain,” stated Michael Mentavlos, Special Agent in Charge, Southwest Field Office.

The United States Attorney’s Office thanks the SBA Office of Inspector General, U.S. Army Criminal Investigation Command, and the Department of Defense Office of Inspector General for their diligent work on this investigation.